Queensgate 'starting with clean slate'

Posted On Monday, 17 May 2010 02:00 Published by
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Queensgate Hotels & Leisure has signed an agreement for the acquisition of a 51% stake in the group for R15m by businessman Joseph Khumalo.


Transport and Tourism Editor

QUEENSGATE Hotels & Leisure last week announced it had signed an agreement for the acquisition of a 51% stake in the group for R15m by businessman Joseph Khumalo, preventing the collapse of the troubled group.

The transaction will be settled through issuing new shares and is subject to the completion of a due diligence report. The group plans to apply to the Securities Regulation Panel for a waiver of an offer to minority shareholders.

Queensgate has been in a downward spiral since it defaulted on the leases of several of its properties earlier in the year and has been in talks with various investors about a possible rescue. Last month it asked the JSE to suspend its listing pending the outcome of these talks.

“It has been a long, hard road but I believe that we’ve reached the bottom and have begun the slow recovery,” CEO Andrew Hubbard said late last week. “The sale of the 51% stake allows us to recapitalise the group and clean up our act. We are virtually starting with a clean slate.”

Not much is known about Khumalo, and Queensgate and its financial advisers, Arcay, have not made any information available. However, the deal is good news for Queensgate in what has been a tough year for the group.

The first sign of trouble for the group was when it announced in February that Hubbard and executive director Holger Friedrichsen were forced to sell 94,8-million shares, or 5% of the issued stock, to cover some of the company’s debt.

The two directors had pledged the stock to the Hospitality Property Fund and Exhibition Building Investments as surety, which had been called in.

The collapse of Queensgate Leisure finally resulted in the Western Cape High Court last month granting an order for the winding-up of the hotel subsidiary. The application was brought by major shareholder Mvelaphanda Holdings and Investec Bank, with Mvelaphanda claiming R67,6m and Investec R30,1m. The group is in talks with Mvelaphanda on the future of their stake.

Liquidated Queensgate Leisure was one of the two main divisions of Queensgate Hotels & Leisure and weighed heavily on the group’s financial results for the year to last August, contributing a loss of R29,8m to its overall attributable loss of R3,2m. The remaining subsidiary, Queensgate Business Development, saved the group, contributing an attributable profit of R26m in the year to August.

The group plans to again focus on hotel development and property arbitrage. “We will develop properties on behalf of investors and then sell them on, keeping a lease on the property and putting in place a hotel operator,” said Hubbard.

Property arbitrage, where the group earned fees as a middleman between the property owner and the hotel managers, was the main reason for its downfall.

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Source: Business Day

Publisher: I-Net Bridge
Source: I-Net Bridge

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